Intel leads surprise inventory decline

Chip suppliers cut inventory significantly in the fourth quarter after inventories had reached worrisome levels in the third quarter.

AMD cut its inventory by $182 million, or about 25 percent, while STMicroelectronics slashed its inventory by $131 million, or about 9 percent, IHS said. In the case of AMD, inventory shrank for its microprocessors as a result of an amended wafer supply agreement with GlobalFoundries for reduced stockpiles, IHS said. ST cut utilization rates after exiting its money-losing joint venture with Ericsson, IHS said.

Two other chip suppliers had notable inventory drawdowns: Texas Instruments, down $91 million or 5 percent, due to weak end-market demand for its chips; and ON Semiconductor, down $63 million or 10 percent, as it burned bridge inventory and coped with reduced revenue, IHS said.

Among inventory gainers, most faulted low seasonality and an uncertain global economy for a rise in chip stockpiles, IHS said. Companies in this group included MediaTek, up $58 million or 14 percent; NXP Semiconductors, up $44 million or 7 percent; and Infineon Technologies, up $43 million or 6 percent, according to IHS.

Only one company that increased inventory did so because of related strong performance, IHS said. Qualcomm Inc. increased its inventory levels by $247 million, or about 24 percent, due to strong market acceptance of its wireless chips in products like the Apple iPhone and iPad, IHS said. Qualcomm is ramping up production and inventories in order to meet increased demand, IHS said.

IHS said it expects chip suppliers to position their inventories in the first quarter to prepare for anticipated demand. Inventories are expected to rise in response to slightly positive global economic indicators as well as favorable semiconductor and end-equipment forecasts—unless major swings occur once more from the larger suppliers that could then end up skewing the industry, IHS said.
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